Countries that encourage tax evasion should miss out on free trade agreements and access to banking, according to economist Joseph Stiglitz who urged Europe to take the lead in fighting tax dodgers in the wake of Donald Trump’s victory in the United States. EurActiv Germany reports.

“Secrecy is part of the darker side of globalisation, from hiding money and money laundering to tax evasion, it all undermines the functioning of our societies,” insisted Nobel Laureate Stiglitz on Wednesday (16 November) in the European Parliament, demanding a redesign of the current international tax system, as well as calling for changes to the EU itself.

“If we cannot tame globalisation, then there will be a wave of anti-globalisation,” warned Stiglitz in front of a European Parliament inquiry committee on the Panama tax evasion scandal (PANA).

In face of tax evasion, the economics Nobel laureate called for a “zero-tolerance” approach, and outlined how this could actually work. Firstly, uncooperative countries could be blocked from participating in free trade agreements (FTA), through the addition of minimum transparency requirements in new deals.

The economist earmarked specific praise for the US Treasury’s reaction since the Panama Papers scandal broke, but was more pessimistic about the future under US President Trump.

“When your president is avoider-in-chief, it’s hard to have confidence in where we are going to go,” he said.

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According to Stiglitz, the only real option is for Europe to take the lead in tackling tax avoiders and the countries that enable them. He also called for more publicly searchable registers of corporation owners to be set up and for more information to be made available to the media.

The Columbia University professor was originally commissioned by the Panamanian government to help advise it on how best to respond to the revelations leaked back in April, but he and Swiss Professor of Law Mark Pieth embarked on their own study when Panama City failed to assure them that their work would be made public.

The European Parliament’s Panama Papers inquiries has invited the journalists that first published the leak to its first hearing, in a political charged move against a “system that many European countries are involved in”. EurActiv Germany reports.

Their study eventually called for an end to the “destructive tax competition” between countries, which has allowed companies like Apple to enjoy an effective tax rate of 0.005%. The European Commission has since ordered the US tech giant to repay some €13 billion of unpaid taxes to Ireland.

On Ireland, Stiglitz accused the country of experiencing “sham growth” on the back of its low tax rates and preferential treatment. Ultimately, a tax competition is a race to the bottom and the bottom is 0%, explained the American, saying other countries will have to shoulder the burden of no tax revenues. Investment also declines as a result, he warned.

Ireland’s parliament battled through an ill-tempered debate on Wednesday to vote in favour of appealing a European Commission ruling ordering the country to collect billions of euros in unpaid taxes from tech giant Apple.

Stiglitz also accused certain parties in the City of London, the British Virgin Islands and the US itself of breaching good standards and called on the EU to exert more pressure and set an example to the rest of the world.

He suggested that companies carrying out unfair trading practices should lose their licences and that European banks should be authorised to halt transactions with countries that do not adhere to transparency standards.

The former chief economist of the World Bank added that non-compliant countries carry “contagion” and that they should be told that “you have a contagious disease and we won’t allow our corporations to interact with you”. He explained that tax-free zones in some countries allow illegal money laundering to take place.

Legal firms have been operating in Brussels for years without registering wtih the EU’s transparency register, a new study has revealed. However, it seems likely that the European Commission will persevere with voluntary registration. EurActiv Germany reports.

Die Linke MEP Fabio de Masi (GUE/NGL), who is vice-chair of the PANA committee, warned that “there are no more excuses for Europe not to deliver on this”. He also called for “brutal transparency” on who actually owns companies and corporate profits.

Despite being pessimistic about what may develop in the US, Stiglitz remained optimistic about anti-tax avoidance efforts on a global level. “I think this is a war we can win. But we need incentives for whistleblowers. In some countries, that can even land you in prison. Those countries should end up on the blacklist.”